Glebe 2 bedder - Hold or Cut Loose?

[GoTigers]

Hi Guys,

So I have a 2 bedroom unit IP in Glebe NSW with car space. Purchased it back in 2005 for $263K and agent has now valued it at approx $620K. The last bank valuation, they wouldn't tell me what it came in at but said it was around the same as what the agent quoted me. Rental income is $550 a week

Due to a number of poor financial decisions when I was younger, this has led me to a few refinances and I now owe $340K instead of chipping away at that principal earlier on.

I currently live in a rental myself, and have worked out that if I was to move into my own place (changing it to PPOR) I would be substantially worse off a month!

I just feel like I'm so far behind now that I might be better off cashing in, purchasing a larger place and renting out the other rooms.

After reading a recent article in the AFR saying that house prices are overvalued by up to 30% I am continually having an internal battle as to whether I should hold onto it or sell up.

I'm just not confident that I am going to receive any more capital growth.

What are your thoughts Somersoft?

 

[Propertunity]

After reading a recent article in the AFR saying that house prices are overvalued by up to 30% I am continually having an internal battle as to whether I should hold onto it or sell up.

What are your thoughts Somersoft?

My thoughts are that if you base your investment decisions on articles in the AFR, or what the governor of the RBA says, or anything else that is not based on proper research and historical trends, then you are doomed to continue making poor investment decisions.

I'm just not confident that I am going to receive any more capital growth.

Why am I equally confident that your property in Glebe will be worth substantially more in 10 year's time? Yes, all capital growth has been put on hold now. Despite the fact that your IP has more than doubled in the last 9 years....Please

 

[Scott No Mates]

Glebe is spitting distance from the city. (I'll take it off you this afternoon cash for your debt ).

You're positive about $100/wk on a real rough calculation.

It sounds like you need to correct the sins of the past hence having more debt and nothing to show for it.

What you need is some discipline to pay out the loan and get comfortable with it. I would suggest seeing a financial planner to get yourself some financial goals and a mortgage broker to get yourself a mortgage which matches your needs.

 

[Bandita]

Why am I equally confident that your property in Glebe will be worth substantially more in 10 year's time? Yes, all capital growth has been put on hold now. Despite the fact that your IP has more than doubled in the last 9 years....Please

This. I can't tell you what you should do, but I am also equally confident your 2-bed in Glebe will be worth substantially more than it is today in 10years time.

It might stall for a few years and then bounce again, but the best predictor of future growth is past historical growth.....the GFC happened a few years after you purchased your unit, and it still doubled......the market was 30% over valued then too - it always is - and it may very well be now, but that doesn't mean you won't see the same growth over the next 10 years. If you always planned on a long term hold, then just do what you planned and don't worry about the noise.....if you planned to sell once your property doubled, well you're there now. I would not be making any decisions based on an article though

 

[GoTigers]

Glebe is spitting distance from the city. (I'll take it off you this afternoon cash for your debt ).

You're positive about $100/wk on a real rough calculation.

It sounds like you need to correct the sins of the past hence having more debt and nothing to show for it.

What you need is some discipline to pay out the loan and get comfortable with it. I would suggest seeing a financial planner to get yourself some financial goals and a mortgage broker to get yourself a mortgage which matches your needs.

Thanks Scott No Mates. I think you've pretty much echoed the rational side of my brain.

Guess I'm just havin one of those days where the proverbial ball and chain feels a little heavier

 

[travelbug]

I just feel like I'm so far behind now that I might be better off cashing in, purchasing a larger place and renting out the other rooms.

How are you "so far behind"? You have a property worth $620K and you owe $340K. That gives you a worth of $280K AND you are CF+.

A lot of people would like to be in that position.

If you sell, what will you do with the money? OK, just read above. But you will lose money selling, buying, stamp duty etc. Lots of things to consider. But don't be under the assumption that because it has had good growth it won't again. Look back on prices 10, 20 years ago.

 

[WattleIdo]

If you move into it, you can pay it off - even if you're paying more than the loan - and then you've got a very enviable PPOR. And there's your discipline. That area used to be the headquarters for frugal types.
I would love to have a property there.

 

[Cash Flows]

Don't sell unless you have to.

Blue chip location and you are cash flow positive.

What is stopping you from moving in, renting out one room and paying down the debt?

Plenty of options but I believe selling should be the last on your list.

Cheers

Cash Flows

 

[GoTigers]

Thanks for your opinions and thoughts guys.

My strategy was always to buy and hold long term, use equity and so on. Now that I've come this far (9 odd years) down the track and I'm actually in more debt I'm kinda wigging out.

But yeah the logical/sensible thing would be to hold and pay it down.

 

[GoTigers]

Don't sell unless you have to.

Blue chip location and you are cash flow positive.

What is stopping you from moving in, renting out one room and paying down the debt?

Plenty of options but I believe selling should be the last on your list.

Cheers

Cash Flows

Renting out my second room has actually been an option I have been considering. Unfortunately the unit is on the smaller side of 2 bedroom (60sqm) and the 2 rooms are right next to each other.

The second room is quite small, and would unlikely attract the type of person I would want to share with. That being an AB professional in their early thirties - I would imagine most would be able to afford a residence of their own.

I know I sound like a whinger, but there are just a lot of things going around in my head at the moment!

 

[Jaggannath]

Glebe is spitting distance from the city. (I'll take it off you this afternoon cash for your debt ).

You're positive about $100/wk on a real rough calculation.

[snip]

What you need is some discipline to pay out the loan and get comfortable with it. I would suggest seeing a financial planner to get yourself some financial goals and a mortgage broker to get yourself a mortgage which matches your needs.

Everything here. I'd suggest moving in, but trying to find someone to rent out the second bedroom. I don't know Sydney well, but looking at the map it may be a very good place for an airbnb style arrangement; it's near the city, and if you furnish it people won't care it's small, they're not intending to be in it much. Just a thought.

 

[knightm]

Everything here. I'd suggest moving in, but trying to find someone to rent out the second bedroom. I don't know Sydney well, but looking at the map it may be a very good place for an airbnb style arrangement; it's near the city, and if you furnish it people won't care it's small, they're not intending to be in it much. Just a thought.

Jagga is a peeerrrfect suburb for airbnb

 

[Spades]

I'm actually in more debt

Now this is what i don't get?

Your IP is CF+ and you have plenty of equity.

What the hell are you winging about???

 

[knightm]

Spades its the focus on the debt (not the equity) and listening to the media that creates the anxiety. Its the life choices to spend more than income that have resulted in growing debt, this has nothing to do with poor performance of the property (property has and most likely will perform just fine). All of this is fixable in my view, just need to follow Scott's advice.

 

[GoTigers]

Spades its the focus on the debt (not the equity) and listening to the media that creates the anxiety. Its the life choices to spend more than income that have resulted in growing debt, this has nothing to do with poor performance of the property (property has and most likely will perform just fine). All of this is fixable in my view, just need to follow Scott's advice.

Cheers Knight

 

[Scott No Mates]

All of this is fixable in my view, just need to follow Scott's advice.

Yeah, I am still waiting for the deeds (oh not that part of the advice)

 

[Mick C]

If your not planning on investing or using that money than i'll say don't sell....yes ur place ( esp fringe suburbs of the CBD) will continue to go up. But it comes a time when it makes sense to sell- When you want to invest that money somewhere else which may produce better growth/faster growth or better or faster yield.

Ie) sell to buy 2 units in a good growth area or a house etc...